Filmon X, LLC v. Window to the World Commc'ns, Inc.

FILMON X, LLC, a Delaware corporation, Plaintiff, v. WINDOW TO THE WORLD COMMUNICATIONS, INC.,an Illinois corporation; DOES 1-10, Defendants.

WINDOW TO THE WORLD COMMUNICATIONS, INC.

d/b/a WTTW, Counterclaim Plaintiff, v. FILMON X, LLC, FILMONTV, INC., FILMON.TV NETWORKS, INC.,FILMON.COM, INC., and ALKIVIADES DAVID, Counterclaim Defendants.

13 C 8451

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 23, 2016

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge:

Plaintiff FilmOnX, LLC ("FilmOnX") originally filed this declaratory judgment action against Defendant Window to the World Communications, Inc. ("WTTW") in November 2013. FilmOnX sought a declaratory judgment that certain technology it used to enable consumers to access WTTW's broadcast programming "from any Internet-enabled device" does not infringe any WTTW copyright. See Compl., Dkt. 1, ¶¶ 1, 24. WTTW counterclaimed for copyright infringement in January 2014, see Dkt. 15, at 19; and FilmOnX answered that counterclaim in February 2014. See Dkt. 23. Shortly afterward, in March 2014, FilmOnX filed, and the Court granted, an Unopposed Motion to Stay the case pending the Supreme Court's decision in American Broadcasting Companies, Inc. v. Aereo, Inc., 134 S. Ct. 2498 (2014) [hereinafter Aereo III], which was anticipated to address a copyright issue concerning a service similar to that used by FilmOnX. See Dkts. 28-31.

Shortly after the Supreme Court's decision in Aereo III, FilmOnX sought and obtained leave "to amend its complaint and plead that it is entitled to a statutory license as a 'cable system' pursuant to 17 U.S.C. § 111 ('Section 111')," relying upon certain language in the Supreme Court's Aereo III opinion. See Dkt. 35, at 1; Dkt. 36. FilmOnX thereafter filed its First Amended Complaint for Declaratory Judgment (Dkt. 37); WTTW filed its Answer and Amended Counterclaim for copyright infringement (Dkt. 38);¹ and FilmOn filed its Answer to that Counterclaim (Dkt. 39). In that Answer, FilmOn added a new fifteenth affirmative defense asserting that its "retransmission of WTTW's copyrighted works is authorized under the compulsory license scheme set forth under Section 111 of the Copyright Act." Id. at 14.

Now before the Court are the parties' cross-motions for partial summary judgment. See Dkts. 48 (WTTW Motion) and 57 (FilmOn Motion). Each side seeks summary judgment in its favor on (1) FilmOn's declaratory judgment claim "seeking a judicial declaration that FilmOnX meets the statutory definition of a 'cable system' under Section 111 of the Copyright Act and is entitled to a compulsory license thereunder," Dkt. 37, ¶ 5; and, correspondingly, (2) FilmOn's fifteenth affirmative defense to WTTW's copyright infringement counterclaim, asserting that "retransmission of WTTW's copyrights works is authorized under the compulsory license scheme set forth under Section 111 of the Copyright Act." Dkt. 39, at 14; Dkt. 39-1, at 14. For the following reasons, WTTW's motion for partial summary judgment on these issues (Dkt. 48) is granted, and FilmOn's motion for partial summary judgment on these issues (Dkt. 57) is denied.

BACKGROUND

As FilmOn's motion for a stay acknowledged, this case is one of several across the country involving similar technology, and which, at the time of FilmOn's stay motion, were likewise awaiting the Supreme Court's decision in Aereo III. See Dkt. 28, at 2. Because an understanding of these other litigations and the Copyright Act provisions at issue in them informs the issues presented in this case, the Court begins with a brief summary of those proceedings and the history underlying the two Copyright Act provisions they address: the "Transmit Clause" and the "compulsory license" provision in 17 U.S.C. §§ 101 and 111.

Congress added these two provisions to the Copyright Act as part of its 1976 amendments to that Act. That legislation superseded two Supreme Court decisions holding that "community antenna television (CATV) systems (the precursors of modern cable systems) fell outside the Act's scope," because their function was to "transmit" the copyrighted content rather than "perform" it. See Aereo III, 134 S. Ct. at 2504-05 (discussing Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968), and Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394 (1974)). The amended Act thus clarified that "to 'perform' an audiovisual work means 'to show its images in any sequence or to make the sounds accompanying it audible." Id. at 2505-06 (quoting 17 U.S.C. § 101).

Correspondingly, "Congress also enacted the Transmit Clause, which specifies that an entity performs publicly when it 'transmits a performance to the public." Id. (quoting 17 U.S.C. § 101, brackets and ellipses omitted). "Cable system activities, like those of the CATV systems in Fortnightly and Teleprompter, lie at the heart of the activities that Congress intended this language to cover." Id. Also highly relevant to this case, the 1976 amendments created a new section—Section 111—to regulate cable companies' public performances of copyrighted works. "Section 111 creates a complex, highly detailed compulsory licensing scheme that sets out the conditions, including the payment of compulsory fees, under which cable systems may retransmit broadcasts." Id. "Congress made these three changes to achieve a similar end: to bring the activities of cable systems within the scope of the Copyright Act." Id.

FilmOn and its predecessors and competitors have been parties in several lawsuits addressing the applicability of these Copyright Act provisions to various services that, like the FilmOn service at issue in this case, retransmit television broadcasts over the Internet. For instance, in 2010, certain broadcasters and television networks filed two lawsuits for copyright infringement in the Southern District of New York—one against FilmOn.com, Inc. and one against its competitor, ivi, Inc.² As in this case, the defendants in these earlier cases asserted that the accused internet retransmission service was a "cable system" entitled to a compulsory license under § 111 of the Copyright Act. Id. The New York court disagreed and issued a temporary restraining order against FilmOn.com, after which it stipulated to a permanent injunction. See id. The case against ivi similarly resulted in a district court decision holding that an Internet-based retransmission service was not a "cable system" and therefore not entitled to a compulsory license under Section 111. See WPIX, Inc. v. ivi, Inc., 765 F. Supp. 2d 594, 617 (S.D.N.Y. 2011). The Second Circuit affirmed that holding in a decision now known as "ivi II." See WPIX, Inc. v. ivi, Inc., 691 F.3d 275 (2d Cir. 2012), cert. denied, 133 S. Ct. 1585 (2013).

The next set of cases (which included this action) involved a new Internet service used by FilmOnX and another of its competitors, Aereo. In 2012, these companies launched a service for streaming broadcast television programming overthe Internet utilizing a separate "mini-antenna" and "separate data stream" for each user. See Fox Television Stations, Inc. v. FilmOn X LLC, -- F. Supp. 3d --, 2015 WL 7761052, at *2 (D.D.C. Dec. 2, 2015) [hereinafter Fox Television]; AereoKiller, 115 F. Supp. 3d at 1155. Notably, FilmOnX (unlike FilmOn.com before it) "explicitly disclaimed" that this mini-antenna service "was a cable system entitled to a compulsory license," relying instead on Second Circuit precedent holding that transmission of a single copy to a single subscriber is not "public" and thus avoids liability under the Copyright Act's Transmit Clause. See Fox Television, 2015 WL 7760152, at *2; AereoKiller, 115 F. Supp. 3d at 1154-55, 1162. Adhering to that case law, the Southern District of New York and the Second Circuit held in Aereo I and Aereo II that Aero's (and thus FilmOnX's) mini-antenna technology did not infringe the Transmit Clause. See WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013), aff'g, 874 F. Supp. 2d 373 (S.D.N.Y. 2012). But the Supreme Court reversed that decision in Aereo III, holding that a system of separate antennas generating separate data streams does not avoid Transmit Clause liability, "regardless of the number of discrete communications it makes." See Aereo III, 134 S. Ct. at 2509.

In reaching the conclusion that Aereo's mini-antenna system falls within the scope of the Copyright Act's Transmit Clause, the Supreme Court considered the similarities and differences between that system and the cable systems "that Congress amended the Act to reach." Id. at 2506. Among other distinctions, the Court considered that the cable systems embraced by the 1976 Copyright Act amendments"transmitted constantly," whereas "Aereo's system remains inert until a subscriber indicates that she wants to watch a program." Id. at 2507. But, the Court noted, "this difference means nothing to the subscriber" and "nothing to the broadcaster." Id. Thus, given "the many similarities between Aereo and cable companies, considered in light of Congress' basic purposes in amending the Copyright Act," the Court concluded that this distinction "does not make a critical difference" to the question of whether Aereo's system "transmits" within the meaning of that Act. Id.

The Court also considered that "an Aereo subscriber receives broadcast television signals with an antenna dedicated to him alone," since Aero "streams the content of the copy to the same subscriber and to no one else," and thus, "only one subscriber has the ability to see and hear each Aereo transmission." Id. at 2508. But the Court rejected Aereo's argument that such individualized transmission is not "a performance 'to the public.'" Id. Rather, the Court concluded: "In terms of the Act's purposes, these differences do not distinguish Aereo's system from cable systems, which do perform 'publicly.' . . . They concern the behind-the-scenes way in which Aereo delivers television...